Virus sell-off hits SA stocks hard on China exposure

Stocks record steepest decline in more than eight months.
SA stocks came in for particular punishment because of their high exposure to China, source of the deadly coronavirus outbreak, chasing investors away from riskier assets. Image: Waldo Swiegers, Bloomberg

On a grim day for global equities, South African stocks have been hit harder than most of their emerging-market peers.

The local benchmark index dropped as much as 2.6% in Johannesburg Monday, the steepest decline in more than eight months. The MSCI Emerging Markets Index fell as much as 0.8%. South African stocks came in for particular punishment because of their high exposure to China, source of the deadly coronavirus outbreak that’s chasing investors away from riskier assets toward havens.

Read: Assets fall as China virus fears grow, rand tumbles

Basic materials account for more than 30% of the main index, while market heavyweight Naspers, its unit Prosus and luxury brands group Richemont push the weighting of stocks sensitive to events in China beyond 55%, said Casparus Treurnicht, a money manager at Gryphon Asset Management in Cape Town.

Johannesburg stocks are also suffering more than usual because several Asian markets are shut for Lunar New Year holidays, causing a lack of liquidity and exacerbating the decline, Treurnicht said.

JSE All Share

Naspers, which owns almost a third of Chinese internet and gaming giant Tencent Holdings Ltd., the local listings of mining behemoths BHP Group and Anglo American, Richemont and Prosus were the five stocks dragging the most on the FTSE/JSE Africa All Share Index. The benchmark was 2.4% lower as of 2:41 pm. Banks were also weaker as the risk-off sentiment gripping traders caused a slump in the rand.

The declines would have been worse were it not for the cushion provided by gold miners, in demand as bullion attracted haven buyers. The four biggest positive contributors to the benchmark index were all gold producers as the sector index jumped as much as 5%.

© 2020 Bloomberg L.P.

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BUY BUY BUY!!!

Buy what, S.A equities? In a market based on systemic economical decline, political capture, unmanageable unemployment, massive capital outflows, huge government budget deficits, crime at feverish levels, a undeniable bankrupt state and state owned enterprises; and with a looming downgrade to junk status (un-investable rating)? Yeah.

Most times in a bad economy big companies do very well because of the lack of competition. All this negative sentiment is creating great value in the market right now, equities are looking cheaper and cheaper. You know the old adage, when there’s blood in the streets and everyone’s running for the doors that’s when there are bargains to be had!

Naspers does not own almost a third of gaming giant Tencent as the Tencent investment is now held in Prosus a subsidiary of Naspers. Naspers owns 72% of Prosus. Therefore Naspers effectively owns 72% of 31% being the Tencent investment held in Prosus.

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